If the interest rate is below the equilibrium rate, the:
A)supply of nonmonetary financial assets is greater than the demand for them.
B)demand for nonmonetary financial assets is greater than the supply.
C)demand and supply of money can still be in balance.
D)supply of money is greater than the demand.

Question

Quizplus · Accepted Answer

When the interest rate is below the equilibrium rate, it means that the demand for nonmonetary financial assets is not high enough to clear the market at the given interest rate. As a result, the supply of nonmonetary financial assets is greater than the demand for them, leading to a surplus in the market. This creates downward pressure on prices (interest rates), encouraging people to move their money into other investments or to spend more. Therefore, the correct answer is A.

If the Interest Rate Is Below the Equilibrium Rate, The